The Start of Something Big? : Auto Club leads the way with car insurance rebates
Insurance Commissioner John Garamendi will get lots of credit for the Automobile Club of Southern California’s decision to become the first auto insurer to comply with the insurance rebates mandated by Proposition 103, and he’s entitled to it. But Auto Club officials also deserve praise for making a statesmanlike decision on a complex and emotional issue.
The fifth-largest auto insurer in California, the Auto Club is the first of the state’s 14 biggest insurance sellers to say it will comply with Garamendi’s order to pay rebates. Most of the other big insurers licensed to sell property and casualty coverage in California expect to fight the rebates in court.
In making his unexpected announcement, Auto Club President Thomas V. McKernan said it’s time for the insurance industry to put the 3-year battle over Proposition 103 behind it and move on. Other insurers should heed McKernan’s advice.
When Proposition 103 was enacted in 1988, it was the only one among a handful of insurance reform initiatives to be approved by the voters. So while Proposition 103 created a better structure for regulating insurance in California, including an elected insurance commissioner, there is still room for improvement. One specific proposal cited by McKernan, which we’ve endorsed, is no-fault insurance to reduce the number of lawsuits arising from minor auto accidents.
It is somewhat easier for a mutual insurance company like the Auto Club to pay rebates than a company that has to worry about paying dividends to stockholders. But the decision is still important for all consumers who have been paying excessive premiums for automobile coverage. By breaking ranks with the other giants in the auto insurance field, the Auto Club may help bring about more fundamental insurance reforms.
